SARS have introduced further changes and enhancements to the ITR14 return on 18 April 2016. Additional sections, questions, items and certain automatic calculations have been added.
The following additional sections have been added:
A company is now required to indicate:
- Whether the company wants to claim donations made to an approved Public Benefit Organisation (PBO) in terms of section18A.
- If answered yes, the return asks whether the company is a Collective Investment Scheme and it also requires the company to indicate how many PBO’s the company has made donations to.
If the above section is answered in the affirmative a separate section opens up which requires the total amount donated during the year of assessment to be completed. It also then requires the reference number of the PBO as well as the amount of the top ten donations made. Taxpayers are therefore requested to keep their section18A certificates (especially the top 10 donations made) at hand for the completion of the ITR14.
The ITR14 will now also allow for the limitation of 10% of taxable income to be calculated and for the remaining balance to be carried forward to the next year of assessment. For Collective Investment Schemes, the allowable section 18A donations will be limited to 0,005 of the average value of the aggregate of all participatory interests held by investors in the portfolio. Donations that are disclosed in the Income Statement section of the ITR14 will automatically be reversed / added back in the tax computation.
A question has been added under the Capital Gains’ section to make provision for debt reduction transactions in terms of paragraph 12A(4) of the 8th Schedule.
Should the question be answered in the affirmative it will ask whether the reduction relates to a local and/or foreign asset(s).
If any of these questions is answered in the affirmative, a further section is opened which will require the amount of the debt reduction whether local or foreign.
Venture Capital Company Investments
A section has been added to enquire as to whether a company has invested in any approved Venture Capital Companies (VCC) in exchange for the issue of shares during the year of assessment. If answered yes, SARS requires the number of investments made in SARS approved VCC’s.
If the above section is answered in the affirmative a further section opens up on the IT14R. This section requires the name of the SARS approved VCC. It also then requires the VCC number, date of issue of VCC shares and the amount. Once again this is required for the top 10 investments made.
Where a company claims PAYE credits, the IRP5 numbers related to the company will now be pre-populated on the ITR14.
The wording of the foreign tax credits question has been amended and has been extended to include foreign tax credits claimed in terms of a treaty.
The following additional questions have been added:
- Does the company own any foreign assets or investments?
- Did the company receive any income subject to foreign taxes paid/payable?
- Were any payments made to a non-resident person in compensation for the rendering of services in South Africa?
Foreign Exchange Gains / Losses
- Is the foreign exchange gain/loss incurred in respect of an exchange item where the counter party is a connected person and if the case whether the gain/loss was realised during the year of assessment?
Domestic Treasury Management Company
- Is the company a domestic treasury management company as defined in section 1?
- Did the company obtain a certificate issued by the SANEDI in respect of energy efficiency savings for the purposes of claiming a section 12L deduction?
- Did the company obtain approval from the Department of Science and Technology as contemplated in section 11D?
- Did you give consent that SARS can provide the attached financial statements to the Companies and Intellectual Property Commission (CIPC)?
- Have the financial statements been audited?
- Have the financial statements been reviewed?
- Did the company enter into any sale and leaseback agreement?
- Does the company exercise any control of a trust?
- Did the company make any donations to a foreign trust?
The transfer pricing disclosure requirements in the ITR14 have been expanded to request details of the number of tax jurisdictions, countries and value per country in relation to related party income received/accrued or expenditure incurred. The ITR14 also introduced additional transfer pricing questions to determine if the taxpayer:
- Has made any changes to its transfer pricing policy since the previous reporting period including a change in its classification
- Is transacting with a tax jurisdiction that does not have a tax treaty with South Africa
- Selected a tested party which is not tax resident in South Africa
- On or after 1990, transfer, alienate or disposed of intellectual property to any non-resident connected party or branch of a South African resident
Lastly, the new ITR14 introduced an additional financial ratio to be disclosed, namely, “specify the debt in relation to tangible assets ratio.”
The overall transfer pricing disclosure requirements will assist SARS greatly in creating risk profiles for taxpayers and send additional information request to those, which are deemed to be higher risk.
New items added to the Income Statement section
- Indemnity payments received
- Expenditure incurred in respect of company restructuring
New items added to the Tax Computation section
The tax computation has been expanded to include additional fields aligned to changes in legislation.
Tax Computation – debit adjustments – non-taxable amounts
- Exempt income received or accrued in respect of government grants(section 12P)
- Income exempt in respect of ships used for international shipping (section 12Q)
Tax Computation – Special Allowances Not Claimed in the Income Statement
- Energy efficient savings deduction (section 12L)
- Improvements not owned by the company (section 12N)
- Improvements on property of which government holds a right of use or occupation (section 12NA)
- Interest incurred (section 24J and section 24JA)
Tax Computation – credit adjustments – Non-deductible Amounts Debited to the Income Statement
- Interest not allowable in respect of debts owed to person(s) not subject to tax (section 23M)
- Limitation of interest deduction under section 23N
- Short term insurance policy premiums not allowable (section 23L)
- Transfer pricing adjustments(excluding thin capitalisation adjustments)
Tax Computation – Amounts not Credited to the Income Statement
- Transfer pricing adjustment(excluding financial assistance)
Recoupment of allowances / Expenses Previously Granted
- Amount recouped in respect of VCC shares sold, for which a tax deduction was allowed
- Reduction of debt(section 19)
If you have any questions, or would like to discuss this further, please contact us.